Innovation isn’t a word that historically has been associated with the private client world; that world probably evokes Dickensian images of the Chancery court, claret and the occasional outrage at a box of bad snuff. However, Guernsey has never been satisfied with that ‘same old, same old’. The island has always questioned the status quo and sought to reinvent itself in new and exciting ways. Carey Olsen Partner Elaine Gray looks at some of the ways Guernsey is seeking to innovate by introducing new financial services legislation and embracing new technologies.
Guernsey’s mixed legal framework (with its shared legal traditions with England and its historic Norman law roots) explain some of its openness to evolving its laws to suit new technologies and new concepts. Having been one of the early developers of financial services products, Guernsey has continued to offer new concepts and vehicles to serve the needs both private and corporate clients.
The introduction of cell company legislation in the late 1990s was a game changer for Guernsey. Now adopted in other jurisdictions Guernsey led this innovation with the creation of Protected Cell Companies (PCCs). PCCs are single legal entities with a central core and a number of cells which allow asset segregation between the various cells. PCCs were quick to take off and have been used for many different purposes ranging from insurance to product liability to licensing of assets.
Guernsey also introduced the world’s first ever system of registered image rights providing people in the spotlight with enhanced protection over the use of their image. Until the image rights register was launched there was very limited and only indirect provision at common law to protect the use of such images. The Guernsey image rights system allows for any image, characteristic or other manifestation of personality to be protected. In addition to the obvious attraction of this for celebrities and sports stars, the image rights legislation is also used by individuals who derive a substantial income stream from their image such as prominent authors or philanthropists. Image rights registration allows for the long-term protection of those images in a way which cannot be done through copyright protection. This secures the long term protection of the image and is a natural fit with Guernsey’s private client sector, which allows an enhanced ability to continuously generate wealth within a trust or similar structure.
While foundations are not a new concept in the private client world, Guernsey developed its own structure, allowing enhanced flexibility compared to other jurisdictions while retaining the solidity needed to instil confidence and bring familiarity for those seeking to use them.
The island is not resting on its laurels. It continues to innovate with a high level of political will behind its plans. FinTech and the digital future are key aspects of the government’s (the States of Guernsey) economic strategy. Last year, the States of Guernsey teamed up with local leading business figures to establish the FinTech and Digital Oversight Group (FDOG). The forum identifies, develops and promotes Guernsey as a leading jurisdiction for FinTech and digital business. The island also recently held its first FinVention event with local and off-island innovators pitching to funders and businesses with their new ideas.
As an example of Guernsey’s innovation in this area, one significant leap forward in FinTech has been the establishment of the ID Register by Guernsey private equity and fund administration business, Ipes. This is a global central depositary for customer due diligence and “know your client” information and has the potential to revolutionise financial services. Clients submit their ID information to create a profile which can then be linked to any financial services activity in which they are engaged. The register already has global traction with US sponsors looking to use it for their funds next year. As a Guernsey initiative, it shows that the island remains at the forefront of global regulatory services.
Also in the Guernsey funds world, but likely to be transferable across many financial services in years to come, administrators are moving their operational platforms into blockchain - which will allow for real time settlement and record keeping. A blockchain is a distributed database that maintains a continuously-growing list of ordered records called blocks; blockchains are inherently resistant to modification of the data so, once recorded, the data in a block cannot be altered retrospectively. Given the world’s concentration on cyber security, this is a major leap forward.
Where Guernsey also excels in this ever-innovating landscape is in its professional services. There is a critical mass of Guernsey lawyers, accountants and other support sectors, who are advising on the regulatory and contractual framework behind these technological initiatives, putting Guernsey at the forefront of global Fintech solutions.
As we approach 150 years since Dickens’ death, we think he’d be rather pleased at all this progress.
An original version of this article was first published in eprivateclient's 2017 Guernsey report, January 2017.